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R-12-15 RESOLUTION NO. R -12 -15 RESOLUTION APPROVING A LEASE FINANCING WITH THE VIRGINIA RESOURCES AUTHORITY, APPROVING THE FORM OF CERTAIN DOCUMENTS PREPARED IN CONNECTION THEREWITH AND AUTHORIZING THE DISTRIBUTION, EXECUTION AND DELIVERY OF THE SAME WHEREAS, on July 28, 2005, the City of Fairfax Economic Development Authority (the "EDA ") issued its $39,630,000 Public Facility Lease Revenue Bonds (City of Fairfax Public Improvement Projects), Series 2005 (the "Series 2005 Bonds ") and loaned the proceeds thereof to the City of Fairfax, Virginia (the "City ") pursuant to a Lease Agreement s dated as of July 1, 2005 (the "Financing Lease ") between the EDA and the City to finance the acquisition, construction and equipping of certain public improvements, including downtown redevelopment improvements and the City's capital contribution for the costs of a new library 1 a to be shared with Fairfax County, Virginia (the "Project "); and WHEREAS, the Council (the "City Council ") of the City desires to refinance the Project by effecting a refunding of the outstanding Series 2005 Bonds, subject to the terms and conditions herein, including a condition that the refunding achieve an aggregate net 11 present value debt savings of not less than 3% (the "Targeted Savings "); WHEREAS, the City by ordinance adopted April 24, 2012, has authorized the lease of certain real property and the existing improvements thereon owned by the City, including City Hall (the "Collateral Property ") to refinance the Project by effecting a refunding of the Series 2005 Bonds; WHEREAS, the City has applied to the Virginia Resources Authority ("VRA ") to refund the outstanding Series 2005 Bonds and refinance the Project, and VRA has indicated its willingness to undertake the same utilizing proceeds of its Infrastructure and State Moral Obligation Revenue Bonds (Virginia Pooled Financing Program), Series 2012A (as more particularly defined in the below - defined Financing Lease, the "VRA Bonds "); WHEREAS, the refinancing of the Project shall be effected by a ground lease of the Collateral Property pursuant to a Deed and Agreement of Ground Lease (the "Ground Lease "), between the City and VRA and subsequent lease back of the Collateral Property to the City in accordance with the terms of a Local Lease Acquisition Agreement and Financing Lease to be dated as of a date specified by VRA, between VRA and the City (the "Financing Lease "), the forms of the Ground Lease and the Financing Lease having been presented to this meeting; WHEREAS, VRA has advised the City that the sale date of the VRA Bonds is tentatively scheduled for May 22, 2012, but may occur, subject to market conditions, at any time between May 15, 2012, and May 30, 2012 (the "VRA Sale Date "), and that VRA's objective is to pay the City a purchase price for the Financing Lease which in VRA's judgment reflects its market value (the "Purchase Price Objective ") taking into consideration the Targeted Savings, the purchase price received by VRA for the VRA Bonds, the issuance costs of the VRA Bonds (consisting of the underwriters' discount and other costs incurred by VRA) (collectively, the "VRA Costs "), and other market conditions relating to the sale of the VRA Bonds; WHEREAS, VRA has acknowledged that the aggregate total of principal components of rental payments under the Financing Lease (the "Rental Payments ") and the "true" interest cost of the interest component of such Rental Payments cannot exceed the respective amounts specified in this Resolution; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAIRFAX, VIRGINIA: 1. Essentiality of Project. The City Council reconfirms that the Project is essential to the efficient operation of the City and anticipates that the Project will continue to be essential to the operations of the City during the terms of each of the Ground Lease and the Financing Lease. 2. Authorization of Ground Lease and Financing Lease. The forms of the Ground Lease and the Financing Lease submitted to this meeting are hereby approved. The City Manager is authorized to execute the Ground Lease and the Financing Lease in substantially such forms, with such completions, omissions, insertions and changes not inconsistent with this Resolution as may be approved by the City Manager, whose approval shall be evidenced conclusively by the execution and delivery thereof. At the discretion of the City Manager, the Ground Lease may alternatively be denominated a Prime Lease. All capitalized terms used but not defined herein shall have the same meaning as set forth in the Financing Lease. 3. Terms of Financing Lease. The following plan of financing is approved. VRA will use a portion of the proceeds of the VRA Bonds to refinance the Project. The City will lease the Collateral Property to VRA pursuant to the Ground Lease and the City will lease the Collateral Property from VRA pursuant to the terms of the Financing Lease under which the City will undertake to make Rental Payments to VRA in amounts sufficient to pay principal and interest on the portion of the VRA Bonds. The final pricing terms contained in the Financing Lease shall be determined by VRA subject to VRA's Purchase Price Objective and market conditions described in the Recitals hereof; provided, however, that (i) the aggregate total of principal components of the Rental Payments shall not exceed $44,500,000, (ii) the ( term of the Financing Lease shall expire no later than December 31, 2035, (iii) the interest component of the Rental Payments shall have a "true" interest cost not to exceed 5% per year (exclusive of "supplemental interest" as provided in the Financing Lease), (iv) the pricing ? u terms shall achieve at least the Targeted Savings, (v) the principal components of the Rental Payments shall be subject to prepayment upon the terms set forth in the Financing Lease and (vi) the obligation under the Financing Lease attributable to the principal components of the Rental Payments shall be sold to VRA at a price not less than 95% of the aggregate principal amount thereof. Subject to the preceding terms, the City Council further authorizes the City Manager to accept the final terms presented by VRA and accordingly to determine the aggregate total of principal components of the Rental Payments and establish a schedule of I I Rental Payments including the dates and amounts, the optional and extraordinary prepayment provisions, if any, of the Rental Payments, all in accordance with the provisions hereof. 11 As set forth in the Financing Lease, the City agrees to pay such "supplemental interest" and other charges as provided therein, including such amounts as may be necessary to maintain or replenish the Capital Reserve Fund. 4. Payment and Prepayment Provisions. Rental Payments due under the Financing Lease shall be payable in lawful money of the United States of America and otherwise comply with the terms set forth in the Financing Lease. The City may, at its option, prepay the principal components of Rental Payments upon the terms set forth in the Financing Lease. 5. Subject to Appropriation. The undertaking by the City under the Financing Lease to make Rental Payments shall be a limited obligation of the City, payable solely from funds to be appropriated by the City Council from time to time for such purpose and shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation or a pledge of the faith and credit of the City beyond any fiscal year for which the City Council has lawfully appropriated from time to time. Nothing herein or in the Financing Lease shall constitute a debt of the City within the meaning of any constitutional or statutory limitation or a pledge of the faith and credit or taxing power of the City. 6. Annual Budget. The City Council believes that funds sufficient to make payment of all amounts payable under the Financing Lease can be obtained. While recognizing that it is not empowered to make any binding commitment to make such payments beyond the current fiscal year, the City Council hereby states its intent to make annual appropriations for future fiscal years in amounts sufficient to make all such payments and hereby recommends that future City Councils do likewise during the terms of the Financing Lease. The City Council directs the City's Director of Finance, or such other officer who may be charged with the responsibility for preparing the City's annual budget, to include in the budget request for each fiscal year during the term of the Financing Lease an amount sufficient to pay all amounts coming due under the Financing Lease during such fiscal year. Throughout the term of the Financing Lease, the City Manager shall deliver to VRA within 30 days after the adoption of the budget for each fiscal year, but not later than July 1, a certificate stating whether an amount equal to the Rental Payments and any other amounts due under the Financing Lease which will be due during the next fiscal year has been budgeted and appropriated by the City Council. If at any time during any fiscal year of the City, through the fiscal year ending June 30, [2036], the amount appropriated in the City's annual budget in any such fiscal year is insufficient to pay when due the amounts payable under the Financing Lease, the City Council directs the Director of Finance, or such other officer who may be charged with the responsibility for preparing the City's annual budget, to submit to the City Council at the next scheduled meeting, or as promptly as practicable but in any event within 45 days, a request for a supplemental appropriation sufficient to cover the deficit. 7. Arbitrage Covenants. The City covenants that it shall not take or omit to take any action the taking or omission of which will cause interest on the VRA Bonds to be includable in gross income for federal income tax purposes or to become a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Without limiting the generality of the foregoing, the City shall comply with any provision of the Tax Compliance Agreement (as hereinafter defined) that may require the City at any time to rebate to the United States any part of the earnings derived from the investment of the gross proceeds of the funds received under the Financing Lease, unless the City receives an opinion of nationally recognized bond counsel that such compliance is not required to prevent interest on the VRA Bond from being included in gross income for federal income tax purposes or from becoming a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The City shall pay any such required rebate from legally available funds. 8. Tax Compliance Agreement. Such officers of the City as may be requested are authorized and directed to execute and deliver a nonarbitrage certificate and tax compliance agreement (the "Tax Compliance Agreement ") in a form not inconsistent with this Resolution as may be approved by the officers of the City executing such document, whose approval shall be evidenced conclusively by the execution and delivery thereof 1 9. Limitation on Private Use. The City covenants that it shall not permit the proceeds derived from the Financing Lease or the facilities refinanced with the proceeds of the . Financing Lease to be used in any manner that would result in (a) 5% or more of such proceeds or the facilities refinanced with such proceeds being used in a trade or business carried on by any person other than a governmental unit, as provided in Section 141(b) of the Code, (b) 5% or more of such proceeds or the facilities refinanced with such proceeds being used with respect to any output facility (other than a facility for the furnishing of water), within the meaning of Section 141(b)(4) of the Code, or (c) 5% or more of such proceeds being used directly or indirectly to make or finance loans to any persons other than a governmental unit, as provided in Section 141(c) of the Code; provided, however, that if the City receives an opinion of nationally recognized bond counsel that any such covenants need not be complied with to prevent the interest on the VRA Bonds from being included in gross income for federal income tax purposes or from becoming a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, the City need not comply with such covenants to the extent provided in such opinion. 10. Official Statement. The City authorizes and consents to the inclusion of information with respect to the City contained in VRA's Preliminary Official Statement and VRA's Official Statement in final form, both prepared in connection with the sale of the VRA Bonds. 11. SNAP Investment Authorization. The City has heretofore received and reviewed the Information Statement (the "Information Statement ") describing the State Non - Arbitrage Program of the Commonwealth of Virginia ( "SNAP ") and the Contract Creating the State Non - Arbitrage Program Pool I (the "Contract "), and the City Council hereby determines to authorize the City Treasurer to utilize SNAP in connection with the investment of any nonrefunding proceeds of the Financing Lease. The City Council acknowledges the Treasury Board of the Commonwealth of Virginia is not, and shall not be, in any way liable to the City in connection with SNAP, except as otherwise provided in the Contract. 12. Redemption of Series 2005 Bonds. The City's Director of Finance and the City Manager, or either of them, is authorized and directed to take or direct the EDA to take all proper steps to call for redemption such portion(s) of the Series 2005 Bonds as shall be refunded, to prepare and deliver any such notices and correspondence necessary therefor and to obtain any documents, certificates and approvals necessary to terminate any prior lease or trust agreements relating to the Series 2005 Bonds and the Collateral Property. 13. Other Actions. All other actions of City officials in conformity with the purposes and intent of this Resolution and in furtherance of the execution and delivery of the Ground Lease and the Financing Lease are ratified, approved and confirmed. The City officials are authorized and directed to execute and deliver all certificates and other instruments considered necessary or desirable in connection with the execution and delivery of the Ground Lease and the Financing Lease pursuant to this Resolution. Any authorization herein to execute a document shall include authorization to deliver it to the other parties thereto and to record such document where appropriate. 14. Effective Date. This Resolution shall take effect immediately. Adopted this 24 day of April, 2012. dyor ATTEST: q n / % City Clerk The vote on the motion to approve was recorded as follows: VOTE: e 1 1 Councilman Drummond Aye Councilman Greenfield Absent Councilman Meyer Aye 9 Councilmember Schmidt Aye 1 Councilman Silverthorne Aye 1 Councilman Stombres Aye �i r